UPDATE 2-US Senators press CFTC to curb oil speculation

WASHINGTON, May 26 U.S. senators, hoping to
rein in high oil and gasoline prices, slammed the U.S. futures
market regulator on Thursday for not moving faster to crack
down on out-of-control speculators in commodity markets.

At a meeting with lawmakers on Capitol Hill, Commodity
Futures Trading Commission Chairman Gary Gensler refused to
spell out when the agency would act on a rule to limit the
number of contracts big market players can hold in oil and
other commodities.

"There is nothing that I heard from him which suggests any
sense of urgency about the need to protect consumers or in fact
to protect our economy," Senator Bernie Sanders told reporters
after he and five other senators met with Gensler.

Sanders, an Independent from Vermont, said the CFTC
violated the law when it failed to impose position limits on
energy and other commodities by January, as required under the
Dodd-Frank financial reform law.

"The chief regulator on oil speculation, in my view, is
breaking the law," he said.

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Take a Look on CFTC commodity reform [ID:nCFTCREG]

Take a Look on CFTC suit against Arcadia [ID:nN25148525]

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Senator Maria Cantwell, a Democrat from Washington state,
said the CFTC needed to act now to drive out the excessive
speculation in the market.

She said Gensler told the senators that speculators made up
about 80 percent of trading in the energy market, and the other
20 percent were legitimate hedgers trying to protect against
swings in prices or supply.

"What it tells us is there should be even more urgency to
act. It is imperative that the CFTC take an aggressive role and
protect consumers today," Cantwell said.

She said if the CFTC does not act, Congress would look for
ways to force the agency to take action. Such a move would be
difficult as many Republicans have problems with the financial
reform law.

Although the agency is expected to push ahead with position
limits as part of its mandate to step up and expand policing of
derivative markets under the biggest financial reforms in
generations, it has conceded that it will miss a July deadline
to impose the measures.

With nearly $4 a gallon gasoline prices hindering U.S.
economic recovery, a group of 17 U.S. senators called on the
CFTC two weeks ago to unveil its final plan by May 23. The
agency made an initial proposal for the rules earlier this
year, but has not set a vote to finalize them.

Democratic Senator Ron Wyden of Oregon criticized the CFTC
for not zeroing in on position limits for oil, which he said
said was more important than the other 27 commodities the
agency is considering for limits.

"It is not cocoa that is driving the American economy right
now. I don't have my phone ringing off the hook on cocoa. It is
oil that drives the economy, and we are looking for some
significantly more aggressive action," he said.

Gensler's meeting with the senators followed an oil
manipulation lawsuit filed by the agency this week against two
traders and a global trading house owned by Norwegian
billionaire John Fredriksen. [ID:nN25151262]

Sanders said he was concerned the CFTC may wait three years
to go after any manipulating firms or traders who may be behind
the current high energy prices.

"What the American people want is action now," he said.

Gensler has said the commission will begin considering
several rulemakings in late summer and he wanted position
limits to be in that first batch.

"It's time to get this rule done," Senator Amy Klobuchar, a
Democrat from Minnesota, told reporters as she left the
meeting.

Gensler did not take questions after the meeting, as
reporters tried to keep up with his quick pace down a long
hallway of the Dirksen Senate Office Building, where the
meeting took place.

A long-simmering debate over the role of speculators in
commodity markets has been revived this year as many prices
push toward their 2008 peaks.

While critics say that investors with no intention of
holding real oil or metals or grains are artificially driving
up prices, many analysts argue that tight market fundamentals
fully explain the latest run-up in prices.

John Felmy, the chief economist for the American Petroleum
Institute, told reporters on Thursday that high oil prices
reflect tighter global supplies and strong demand, and
speculators should not be blamed.

(Reporting by Tom Doggett, editing by Jonathan Leff, David
Gregorio and Lisa Shumaker)